Iceland probe accuses former PM and ex-central bank head

By IBT Staff Reporter On 04/12/10 AT 1:08 PM

Iceland's former prime minister and central bank head and five other former officials acted with gross negligence in failing to prevent a banking collapse in 2008, an official investigation found on Monday.

The Special Investigation Commission report pointed the finger firmly at seven officials including then-prime minister Geir Haarde and former central bank chief David Oddsson over the collapse of Iceland's three main banks. The crisis plunged the economy into a recession from which it has yet to recover.

The Commission finds that these seven have demonstrated gross negligence in the discharge of their duties, commission chairman Pall Hreinsson told reporters.

They had the necessary information, but did not act accordingly, each pointing the finger at the next person, he added. The commission's 2,000-page report is the first official in-depth examination of the crisis.

Hreinsson said a parliamentary panel would decide whether legal action was taken against the individuals, who also include Oddsson's co-governors Eirikur Gundason and Ingimundur Fridriksson, former finance minister Arni Mathiessen, former banking minister Bjorgvin Sigurdsson, and Jonas Jonsson, ex-director of Iceland's financial services watchdog.

In late 2008, Iceland's three main banks collapsed under the weight of debts built up during a decade of rapid overseas expansion.

While a number of banks in other countries went under or had to be propped up by governments in the turmoil following the collapse of Lehman Brothers in September 2008, Iceland's whole financial system broke down.

When Glitnir, Landsbanki and Kaupthing were taken over by the state, their combined balance sheets were around 10 times the size of Iceland's economy.

The crash left Iceland dependent on overseas aid, led by the International Monetary Fund. It is also saddled with more than $5 billion in debt to the Britain and the Netherlands that has complicated its economic recovery plans.

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